Concur And NetSuite On Larry’s List

Concur (NASDAQ:CNQR) recently reported strong results that beat estimates and said it would be ramping its investment across its business. The prospect of higher spending has led to investors selling shares, causing the share price to fall from about $48 to $43. Let’s take a closer look.

Concur, a SaaS provider in the niche area of expense management, recently reported fourth quarter revenue of $95.2 million, up 23% y-o-y and 6% q-o-q. GAAP net loss was $14.0 million, or $0.26 per share compared to net income of $3.4 million, or $0.06 per share last year. The year-over-year decrease in net income was driven primarily by the accounting impact of the $120 million TripIt acquisition. Non-GAAP pretax income was $20.5 million, or $0.37 per share compared to $16.1 million, or $0.30 per share, for the year-ago quarter. Analysts expected earnings of $0.24 on sales of $94.7 million.

Gross margin was 73%. Cash and investments, net of customer funding liabilities and debt, increased approximately $22.7 million q-o-q. Concur repurchased shares for about $1.8 million during the quarter.

For fiscal year 2011, total revenue was $349.5 million, up 19% y-o-y. GAAP net loss was $10.7 million, or $0.20 per share, for fiscal 2011, compared to GAAP net income of $20.1 million, or $0.38 per share, for fiscal 2010. Non-GAAP pretax income was $66.3 million, or $1.20 per share, for fiscal year 2011, compared to $64.1 million, or $1.22 per share, for fiscal year 2010.

For the year as a whole, new customer growth, measured in terms of dollar-based booking, was up roughly 35% year-over-year. Based on this, Concur expects to deliver 25% revenue growth for fiscal year 2012. Customer retention rates were consistent with its historical averages in the high 90% range.

A critical driver of the productivity of Concur’s direct sales organization is the strength of its partner referral channels such as American Express. Concur completed three years of partnership with American Express and reported that bookings generated through the American Express partnership in the quarter were roughly 50% of the customer bookings it generated during the entire first year of the partnership.

Early this year, ADP transitioned from a long-standing reseller relationship to a referral relationship. In November, ADP assigned to Concur all rights and obligations relating to Concur solutions for clients that used to be resold by ADP.

In September, Concur and Salesforce.com collaborated to deliver Concurforce – a new Concur travel and expense management offering built on Force.com, Salesforce.com’s social enterprise platform for employee-facing apps. Although Concur doesn’t expect any revenue contribution from Concurforce in fiscal 2012, it does expect increase in new bookings over the course of the fiscal year.

Concur also announced an alliance with Intuit during the quarter to make Concur’s market-leading expense management solution available to more than 4.5 million QuickBooks users.

CEO Steve Singh said in the earnings release:

“In order to capitalize on the robust demand environment, we will significantly ramp our investments across the business. We expect to double our distribution capacity over the next 24 months, drive the innovation curve in our industry and set the standard for world-class service.”

Concur is building out a second global operations center in Manila, the Philippines, to complement its operating center in Prague. It is also building out its European data center capabilities to provide its global clients with more options for hosting, reduce redundancy, and continue its global expansion. The company also has several IT initiatives that should make back-end processes more efficient as it continues to grow the business.

For the first quarter, Concur expects revenue to increase approximately 23% y-o-y and non-GAAP pre-tax income per share to be $0.29. Analysts expect growth of 21.5% and EPS of $0.23. For fiscal year 2012, Concur expects revenue to grow approximately 25% y-o-y and non-GAAP pre-tax income per share to be $1.25, ahead of analyst estimates of 21.6% growth and EPS of $1.04. The stock is trading around $45.19 with a market cap of about $2.44 billion. It hit a 52-week high of $58.19 on May 2.

The recent $1.5 billion acquisition of SaaS CRM vendor RightNow by Oracle showcases the growth potential of the SaaS market. It might well be Oracle’s first step to picking up more SaaS companies, and Concur could be one of its targets. Oracle CEO Larry Ellison is a majority shareholder in NetSuite, a SaaS ERP vendor with annual revenue of $193.1 million. NetSuite (NYSE:N) recently reported third quarter revenue of $61 million, up 23% y-o-y. Subscription and support revenue for the quarter was $51.3 million, representing 23% growth over the same period in the prior year. Net loss was $6.9 million, or $0.10 per share, compared to a net loss of $7 million or $0.11 per share last year. Non-GAAP net income was $3.9 million, or $0.05 per share, compared to non-GAAP net income of $2.6 million, or $0.04 per share, last year. NetSuite is trading around $39.10 with market cap of about $2.65 billion with a 52-week range of $24 to $44.53. It will be interesting to see which companies end up being acquired.